Supreme Court Questions ED's Jurisdiction in Tamil Nadu Liquor Scam Investigation: Federal Structure at Stake

New Delhi:

The Supreme Court on Tuesday challenged the Enforcement Directorate regarding its investigation into an alleged liquor scam involving Tamil Nadu State Marketing Corporation Limited (TASMAC).

For the second time within six months, the court questioned the probe agency about two sets of raids conducted in March and the discovery of 'incriminating material', requesting clarification.

"What happens to the federal structure? Are you not taking away the state government's right to investigate?" inquired a bench headed by Chief Justice BR Gavai to the central agency. "Whenever you have a doubt... 'is the state not investigating the offence'... can you go and do it yourself?"

Notably, as the proceedings continued, the Chief Justice restrained from further commentary, observing, "In the last six years, I have seen many cases investigated by the ED... but now I do not want to say something, otherwise it will be reported (by the media), again."

During today's session, senior advocates Kapil Sibal and Mukul Rohatgi, representing the Tamil Nadu government, questioned how a state-run corporation could be raided and electronic devices seized despite having initiated police cases to investigate the alleged offenses.

"We already filed FIRs... Why are they (the ED) coming in-between when we have already filed FIRs and we are investigating?" argued Sibal, while Rohatgi questioned, "What happens to the right to privacy of TASMAC staff... how could they detain mobiles of the staff? Women employees were held back..."

Additional Solicitor General SV Raju, appearing for the probe agency, responded that if the state had already registered 47 police cases and 'rampant corruption' persists, the ED was entitled to investigate.

"There are 47 police cases... there are large-scale irregularities, large-scale corruption. We are only investigating the money laundering aspect. These are all predicate offences."

Sibal countered by referencing Section 66(2) of the Prevention of Money Laundering Act, which mandates that if the agency discovers evidence of another law being violated during an investigation, it must share that information with the relevant authority for appropriate action.

At this juncture, the Chief Justice also intervened, asking Raju, "What happens to the federal structure? What happens to 66(2)", to which the Additional Solicitor General replied, "We found incriminating evidence... look at the nature of the FIRs, look how rampant corruption is."

"Then they have to give it to us... you take the phones, the detailed chats..." Sibal responded.

In the previous hearing in May, the Supreme Court had similarly posed challenging questions to the ED.

Chief Justice BR Gavai had admonished the ED, saying, "You may register cases against individuals... but corporations? Your ED is passing all limits! Issue notice, returnable after vacation."

The court had then instructed the agency to temporarily suspend its investigation.

This directive was welcomed by the ruling DMK; former Rajya Sabha MP RS Bharathi described the order as a 'blow to the BJP's efforts to malign the state government'. "BJP can't digest DMK's consistent electoral victories... That is why they're using the ED to defame us," he stated.

'ED Has No Case'

The Supreme Court had been petitioned by the DMK-led state government and the state-run marketing corporation, which holds a monopoly over wholesale and retail liquor trade. They sought to contest an April 23 order by the Madras High Court that approved ED action in this matter.

TASMAC itself is not named as an accused in any of these police cases and, in several instances, is the complainant, the plea highlighted.

Furthermore, without a predicate offence naming TASMAC as an accused, the probe agency lacked jurisdiction to initiate proceedings under the Prevention of Money Laundering Act, the DMK contended.

ED Claims Against TASMAC

In March, the agency claimed it discovered "multiple irregularities" in TASMAC operations.

The ED also reported finding "unaccounted" cash amounting to Rs 1,000 crore.

Specifically, it claimed to have uncovered "incriminating" data concerning corporate postings, transport and bar licence tenders, and indent orders 'favouring' certain distilleries.

There was also "evidence", according to the ED, of fraudulent pricing, including surcharges of Rs 10 to Rs 30 per bottle sold by TASMAC outlets imposed with the "involvement" of TASMAC officials.

The raids were conducted again days later.

Ten premises were searched under the Prevention of Money Laundering Act (PMLA), and the ED claimed to have discovered 'manipulated data' indicating fraud during tender awards.

Subsequently, Tamil Nadu Excise Minister S Muthusamy launched a counterattack, accusing the ED of harassing state government officials. He alleged 'political vendetta' and suggested that searches of TASMAC's offices in Chennai and elsewhere had 'ulterior political motives'.

He emphasized that the ED had found no proof to substantiate the alleged irregularities and affirmed that Chief Minister MK Stalin's government firmly supports all state officials consistently.

The 'political vendetta' reference alluded to allegations by the opposition that the BJP employs federal agencies to target political rivals, particularly before major elections.

The alleged TASMAC liquor scam has emerged just as the ruling DMK and the main opposition, the AIADMK (along with its inconsistent ally, the BJP) prepare for next year's Assembly poll.